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FED ERAL RE SE R V E BANK
O F NEW YORK
r Circular No. 3 8 7 8 1
L
July IS. 1952
J

REGULATION X
REAL ESTATE CREDIT
Procedures for Relaxing Residential Credit Controls

To all Persons Engaged in the Business o f Extending Seal Estate Credit
in the Second Federal Reserve D istrict:

Following is the text of a statement issued jointly today by the Board of Governors of the
Federal Reserve System and the Housing and Home Finance A gency:
The B oard o f Governors o f the Federal Reserve System and the A dm inistrator o f the Housing
and Home Finance A gen cy announced today the procedures that will be follow ed in carrying out the
new housing credit provisions o f the Defense P roduction A ct Amendments o f 1952 and o f the new
E xecutive Order implementing those provisions.
Under the amendments to the Defense Production A ct, if housing starts for any consecutive three
months fall below an annual rate o f 1 ,2 0 0 ,0 0 0 , residential credit controls shall be relaxed so as not
to require a down paym ent o f more than 5 % o f the transaction price. The amendments further p ro­
vide that such relaxation shall begin not later than one month after the expiration o f the consecutive
three months during which housing starts were at an annual rate o f under 1 ,2 0 0 ,0 0 0 .
The amendments to the Defense Production A ct authorize the President to estimate the rate of
housing starts and to announce the beginning or termination o f a period o f relaxed credit controls.
This authority has been delegated by the President, in amendments to Executive Order 10161, to the
Department o f Labor with respect to estimates o f starts and to the Federal Reserve B oard and the
H H F A with respect to required announcements.
A ctin g under that delegation, the follow in g procedures have been determined u p on :
H ousing starts will be estimated, for purposes o f possible credit relaxation under the amend­
ments, beginning with starts fo r the month o f June 1952. These estimates will be made by the Labor
D epartm ent’s Bureau o f Labor Statistics, which will also make estimates o f the annual rate o f starts
each month adjusted fo r seasonal variations in the rate o f construction. The housing to be counted
in the estimate shall consist o f permanent, nonfarm , fam ily dwelling units. B LS will transmit its
estimates to the Federal Reserve Board.
I f the estimates show that fo r three consecutive months, starts are below a seasonally adjusted
annual rate o f 1,200,000, then the Federal Reserve B oard, with the concurrence o f the H H F A
Adm inistrator, will announce a period o f residential credit control relaxation to begin not more than
a month after the termination o f the three-month period. F o r example, if housing starts during
June, J u ly and A ugust are below a seasonally adjusted annual rate o f 1,200,000 for each o f those
months, the period o f credit control relaxation would begin not later than October 1.
Such a period o f relaxation could be terminated by the Board, with the concurrence o f the
Adm inistrator, any time after construction starts during three consecutive months exceeded an
annual rate o f 1 ,2 0 0 ,0 0 0 .
The authority o f the Federal Reserve B oard and the A dm inistrator o f the H ousing and Home
Finance A gen cy to administer credit controls remains unchanged until a period o f credit control
relaxation has been announced, the two agencies pointed out. Both agencies made it clear, however,
that no change in the down payment requirements on residential properties is contemplated at this
time, particularly in view o f the fact that these requirements were modified as recently as June 11.

Additional copies of this circular will be furnished upon request.




A

llan

S

proul,

President.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102